Archive - Apr 2009

Ah, what the conflicted desks will not do to keep the market up ahead of the offerings. Rolling buy-ins are prevalent today as repos and stock loans get "reduced borrow" marching orders, forcing traders and clients to cover shorts.

The same "liquidity providers" that have been discussed previously in Zero Hedge, are also in dark pools to make sure trading costs are shifted from observable to less observable or not directly observable. Observable trading costs are the difference from VWAP, open price or arrival price + commission and spread costs. Less observable are bid/ask drift before a dark pool print.

As the GM and Chrysler bankruptcy is now a matter of weeks if not days (if one listens to CNBC "it is all priced in") I could not help but wonder just what the fallout of a bankruptcy would be on security holders in the structured realm. And any such consideration would have to take into account the potential fall out from the OEs but also within the entire supply chain (which few are talking about on prime time TV).

Could this be a harbinger of how massively underfunded corporate pension plans intend on tackling the seemingly insurmountable problem of upcoming pension obligations? In an 8-K released earlier, trucker YRC Worldwide has come up with a novel solution:

Source: LPC Loan Connector

The Capital Markets Liquidity Index subcomponents:

The Washington Post out with a good expose on the non roller coaster-based freefall for Dan Snyder's Six Flags.

The firm, which announced last week that its stock was being delisted from the New York Stock Exchange, faces a more than $300 million payment to preferred stockholders in August that the company says it cannot afford. Fitch Ratings recently warned that a "default is imminent or inevitable." Its shares ended the week worth 26.6 cents.

• China cuts purchases of U.S.

• AIG FP declines to sign up for ISDA Big Bang protocol, instead relying on ongoing bilateral arrangements (FT).

Following up on a previous post discussing how the OTS's TARP cutoff could be the death blow to Genworth Financial, the analysts at Egan Jones have released an analysis that basically confirms that the company is now in run off mode, or will just collect cash from asset unwinds.

Some observations on the total U.S. debt (the number are conservative) without commentary. The total is subject to interpretation and the probabilistic treatment of contingent liabilities and guarantees as well as the netting of derivative notionals.

Total US Debt so far: $115 - $315 Trillion dollars? (excluding/including derivatives notional)

$380,000 - $1,037,000 per person.

The break out:

$9.7 Trillion in bailouts

I thank readers who provided tremendous insights on the market illiquidity post. However, one point that nobody mentioned, which may very well be at the heart of the problem, has to do with the issue of negative convexity from a delta-hedging perspective.

A visual guide to deflation (Mint)

Government Sachs is in control (Market Watch)

With articles like this coming out of Time magazine, it is inevitable that in the immediate future, the United States will be split into two partisan camps. However, this will not be the traditional schism of republicans vs. democrats, contrary to Mr. Barney Frank's attempt to start ideological partisan warfare.